Developers opt for cash over court

As if you didn’t know already, Dubai property developers are all about the money. Emirates 24-7 reports that companies are choosing to keep payments made by defaulting investors rather than go through the process of taking them to court.

The companies are preferring to cancel sales and purchases agreements (SPAs) and retain whatever cash has been paid so far, says the website.

“We find that developers are generally looking to cancel sale and purchase agreements using the provisions of Decree No 6 of 2010 with the assistance of the Land Department of Dubai, rather than take investors to court,” Brent Baldwin, Associate, Hadef & Partners, told Emirates 24-7. “Decree No 6 allows the developer to retain certain penalties in the case of a purchaser default and our observation of the market is that developers will look to use the remedies in Decree No 6 in preference to going to court, as it is a much faster process and avoids the need to incur litigation costs.”

Mohammed Kawasmi, Senior Associate, Property Department, Al Tamimi & Company, said, “We have many cases where the developers canceled the SPAs for defaulters as per the procedures mentioned in Decree No 6. The procedure is available for developers only and not purchasers. The only remedy for a purchaser is to refer this matter to court or arbitration if they want to sue the developer.”

It seems that with the exception of a few companies, developers have not been pursuing investors in court. But the reasons may go deeper than just wishing to save time and money, says Ludmila Yamalova, Partner, Al Sayyah Advocates. She thinks developers may in breach of their contractual agreements, and hence keen to avoid court.

“In such circumstances, under the UAE law, if the developer defaults first, the investor has the right to suspend his/her obligations to the developer. Therefore, before developers decide to sue investors in court for outstanding payments, they will first have to assess their legal positions to ensure that they have a legitimate claim,” Yamalova says.